H&M cuts dividend by -67% and takes a loss

From the Swedish fashion multinational H&M Group, the parent company of chains popular among consumers such as H&M, Cos, Arket or & Other Stories, reported this morning the results compiled by the multinational at the end of the last financial year. Complete cancellation of the 2022. period between December 1, 2021 and November 30, 2022, for which the Swedish company itself had already presented its interim results in the middle of last December. At that time, they reported a certain recovery in their turnover, still lagging behind pre-pandemic levels, which, however, was finally accompanied by a sharp collapse in their profits.

Entering in this way the accounts, already audited, of the company at the end of this last year, from H&M, they report that they managed to close the year with a total net turnover of SEK 223,553 million, about 19,939 million euros to the current change. billing figures representing an increase of +12.36 per cent compared to SEK 198,967 million collected in last year’s 2021 sales; But still, despite the decrease of -3.95 percent in relation to the 232.755 million SEK that the company paid out during the 2019 financial year, the last one completed outside the coronavirus pandemic.

Despite what was assumed, and treated as such by the main financial analysts, that this would be accompanied by a certain recovery in the company’s profitability, the slight increase in the group’s billing levels turned out to be a net profit of only SEK 3,566 million, approximately €318.06 million at the price of current exchange. an amount reflecting a decrease of -67.61 per cent compared to SEK 11,010 million of benefits collected at the end of 2021; In addition to -73.47 percent in relation to the 13,443 million benefits harvested during 2019.

“Although 2022 was a turbulent year marked by negative externalities, such as geopolitical challenges, significant inflation and rising costs, our sales increased by 6 percent for the full year,” says Helena Helmerson, CEO of H&M. Through some data released to the public by the same management of the Swedish group. “After we left behind the worst negative effects of the epidemic, the war broke out in Ukraine,” a struggle in the face of which “we quickly decided to temporarily stop sales in the affected countries and then close our business in Russia and Belarus.” It was precisely this “decision to divest the business in Russia, which was an important and lucrative market” that “ultimately had a significant negative impact on our results.” The impact it ended up having is added to due to “increases in raw material and shipping costs, combined with a historically strong US dollar,” resulting in “significant increases in the price of real estate purchases.”

In the face of these tensions within its value chain, and as the company previously explained, “rather than shifting the total cost to our customers, we have chosen to strengthen our position in the market”; Without also being able to ignore the “increase in energy costs”, in addition to those derived from the implementation of the adjustment program that H&M launched at the end of the year, the same program that will end up laying off about 1,500 workers. The combined effect of these factors, Helmersson adds, fueled a “negative impact” on the company’s accounts in the fourth quarter. The impact amounted to “about SEK 5 billion compared to the same quarter last year,” and in what ended up entering the company into negative territory. , after closing the last last quarter with a net loss of -864 million SEK, around – 77 million euros at the current exchange rate A figure far from the interest of 4621 million SEK that it managed to collect at the end of the fourth and final quarter of fiscal 2021.

Good estimates and prospects for the short and medium term

Looking at this new year of 2023 in which the Swedish multinational fashion company has already begun, Helmersson expects the company’s commitment to continue making investments in which to develop each of the brands that are part of its portfolio. However, efforts that H&M will prioritize as the flagship brand and flagship of the group, and the chain determined to grow in omnichannel. With all of this, the goal of going forward into 2023 that they’re positioning as a transition year toward their goal of reaching, by 2024, double-digit operating margin.

“External factors that had a negative impact on our acquisition costs are gradually reversing, and are expected to become positive on our results during the second half of 2023.” In this regard, “the procurement costs are already lower for the orders that are now being placed compared to the same period last year”, to which will be added the expected “positive impact”, equally for the second half of the year, as a result of the implementation of the new program of cost reduction and efficiency improvement that has been implemented. Announcement at the end of September 2022. The plan through which, through other measures in addition to 1,500 layoffs, the company expects to generate annually a saving of SEK 2 billion.

Relying on this normalization of inflationary pressures and the fruits of this adjustment programme, “our top priority will be the H&M brand, through which we continue to work to improve the assortment and the customer experience, both in store and online, at the same time that we progress in the integration of the two channels”; While “all of our brands continue to develop in parallel with initiatives in areas such as sports, beauty and home.” Likewise, “Through our investment arm CO:LAB, we are building value through a range of partnerships and exciting and innovative business models,” among which Sellpy stands out, a platform that “is growing rapidly and is already one of the major players in second-hand fashion in Europe.” A series of developments in its value chain, in technology and artificial intelligence, for which “we are increasing capital expenditures from SEK 7 billion to SEK 10 billion by 2023”.

“Despite the difficult situation in the world around us, the H&M Group remains strong, with a strong financial position, good cash flow and a well-balanced inventory,” defends the CEO of H&M Group. As indicated, despite poor indications that the end of the year has begun, “sales have started into the new year well,” Helmerson is moving forward. “External factors are still a challenge, but it is evolving in the right direction,” and adding this to “our investments and our efficiency improvements, there are very good foundations for 2023 to end up with a year of higher sales, higher profitability and lower inventory.” Aspects that, if they finally happen, will allow the group to advance in our “goal of achieving double-digit operating margin by 2024”.